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ISCOVER
Every year we run an annual Christmas spending survey looking at the spending and budgeting habits of Australians when it comes to the festive season. More than 3,450 people took part this year and the results are quite revealing about this country’s financial acumen.
Respondents told us they’ll spend the same as last year, however, more people are prepared to go into debt. One in five Australians said they will borrow money to pay for Christmas and a third of borrowers (36 per cent) intend to use a credit card.
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A lack of budgeting and planning seems to be contributing to this reliance on credit, as one in six Australians (17 per cent) said they haven’t set a budget for Christmas 2015, compared to one in ten (9 per cent) last year. And just over a quarter (27 per cent) of people say they have no idea how much they’ll spend on Christmas, versus 17 per cent last year.
This might not sound bad or unusual to you, but the Christmas debt hangover can last for some time. Incredibly, 1 in 3 borrowers take up to 6 months to pay off the Christmas binge, while 1 in 10 borrowers are still paying the debt off.
Why does this matter?
Some might say Christmas spending doesn’t reflect financial habits of the rest of the year, but we’d argue the opposite. Our own research with Core Data from 2013 proved that the household budget is dead and people are relying on checking their account balance to manage their finances. This trend holds true for how people manage their Christmas spending.
This lack of financial awareness shows that the government’s financial literacy campaigns are having limited impact. It also raises the question about the role of lenders and brokers in financial education.
While we’re not a financial adviser, we take our responsible lending obligations seriously. Assessing affordability and having an open and honest conversation with our clients is a vital part of this education process.
Food for thought
The most intriguing survey result for this year was the impact of peer pressure on overspending. Over one third (37 per cent) of Aussies said social pressure causes them to overspend at Christmas. Clearly the ‘keeping up with the Jones’’ idiom is alive and well.
Reflecting on this, what can brokers (and equally we as lenders) possibly do to educate Aussie borrowers about overspending? Declining them once they are deemed overexposed is currently our only tool, so really the challenge is to find a more proactive and effective solution before it’s too late.
